Wealth of Nations December 2006

On Milton Friedman's Unfinished Work

Despite Milton Friedman's best efforts, economic liberty is widely regarded as very much a second-class kind of freedom.
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My previous column had closed and gone to press when I heard that Milton Friedman had died. I hesitate to add to the many excellent admiring articles that appeared in the following few days—by now there cannot be much else to say—but please indulge me. I could not forgive myself for letting the event pass without adding my own words of appreciation, however inadequate or superfluous.

Friedman was the formative intellectual influence of my life. I started out loathing the man (or what I thought he stood for) and ended up idolizing him. As a schoolboy I was aware of his reputation as the leading apologist for evil capitalism, supreme academic commander of the enemy forces. And not much changed in that when I first began to study economics properly, reading Friedman for the first time and having to acknowledge that he was a brilliant scholar. None of that disturbed my militant leveling instincts.

Economics was one thing, "political economy" quite another. Friedman could have been right or wrong about monetary-base control, or about consumption and saving, or about the nonaccelerating inflation rate of unemployment, and so forth, without those views implying much, one way or the other, about capitalism and socialism as rival systems of organization. In other words, it was possible to recognize, grudgingly of course, Friedman's brilliance as a pure and applied economist, while putting his larger views about society to one side. And that is what I did.

If I recall correctly, what first unsettled me at this deeper level was watching a recording of a televised debate between Friedman and John Kenneth Galbraith on the respective roles of state and market. In those days I admired Galbraith, had read all of his books, and reveled in his every wise pronouncement about the deficiencies of Western capitalism and the unacknowledged virtues of Soviet central planning. I remember excitedly tuning in to this program, avid to see all that superior understanding, human empathy, and magisterial disdain pour down on poor old Friedman's head. Well, Friedman quietly, courteously, and good-humouredly tore Galbraith to shreds—or so it seemed to me.

Being a lethal debater—which Friedman certainly was; nobody else came close—does not make you right. But after this encounter I was more receptive to Friedman's broader economic philosophy. I admit, I still took a while to come around: Even when I read Capitalism and Freedom (Friedman's best book, in my view), it didn't so much change my mind as open it. It took a few more years, and a job in government, to complete my education and convince me that Friedman had been right all along about the main thing—right to argue that, when it comes to advancing social welfare, free markets are capable of very much more, and governments very much less, than is almost universally supposed.

Much of what is wrong with popular attitudes to capitalism comes down to one thing: a lack of wonder at what uncoordinated markets can achieve. Going to a grocery store for the hundredth or thousandth time is a pretty humdrum experience. As a rule it isn't going to elicit much of an intellectual response—though if it does, the response might be one of two kinds. The commentator Robert Kuttner once wrote of his dismay at the great number of breakfast cereals on offer in his local grocery. What a waste, was his point; who could possibly need all these different cereals? Can't we arrange things more intelligently? This is a leftist kind of response: "Put somebody sensible in charge and plan things better." The liberal response (in the proper sense of "liberal") is different: "How amazing that all these choices are available, so that every taste is catered to, and it's all so cheap."

In his best-seller Free to Choose, a more popular version of Capitalism and Freedom, and in the television series of the same name that Friedman did for PBS, this necessary sense of wonder is often at the fore. In one memorable segment, talking straight to the camera, he explains how the pencil he's holding is itself a small miracle of spontaneous economic cooperation. Governments struggle to do the simplest things competently. In so many instances, markets do impossibly complex things—yet so smoothly and efficiently that we do not even notice. And when we do notice, it is usually to complain. (You can watch the clip of Friedman and the pencil on YouTube: www.youtube.com/watch?v=dbRcmKRv-zo.)

That flair for debate and expression made him a superb print and television journalist, whenever he could be prized away from his day job. The Wall Street Journal ran a well-chosen selection of his popular writing on November 18 (see www.opinionjournal.com/extra/?id=110009267). Every snippet is a gem. Pure Friedman, for instance, are the observations on Social Security. This is a program of two parts, he explained. The first part is a high and steeply regressive income tax, levied with no exemption up to a fixed ceiling. The second part is a welfare subsidy paid without regard to need, based on marital status, longevity, and recent earnings. Nobody in his right mind would support either of these ideas taken one at a time. (Isn't Friedman right about that?) Yet in combination, see what happened. These two wrongs have become the holiest of sacred cows: "What a triumph of imaginative packaging and Madison Avenue advertising," Friedman said.

Enormously influential as he was, and triumph as he invariably did in debate with his intellectual opponents, I don't know if you could say that Friedman was on the winning side in the 20th century's great battle of ideas. Communism collapsed, to be sure, but in Europe and the United States, economists like Friedman saw a lot of ground surrendered to higher taxes and public spending, and to an ever-proliferating web of economic regulation. There were interruptions now and then (notably Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom), but interruptions is all they were. Over recent decades the trend in America has been toward gradually diminishing economic freedom.

And I don't know if the most important thing that Friedman had to say—the cornerstone of his intellectual system—has any more adherents in the West now than it did 40 years ago. This basic idea is the subject of Capitalism and Freedom. One of The Wall Street Journal's selections sums it up well:

It is important to emphasize that economic arrangements play a dual role in the promotion of a free society. On the one hand, "freedom" in economic arrangements is itself a component of freedom broadly understood, so "economic freedom" is an end in itself to a believer in freedom. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.

It is still true, despite Friedman's best efforts, that economic liberty is widely regarded as very much a second-class kind of freedom—if it counts as freedom at all. When the government infringes on civil liberties—to help it prosecute the war on terror, let's say—there is an outcry, and rightly so. In this country, most infringements of free speech are simply unthinkable. But a tax increase (a confiscation of private property), or an import quota (a prohibition to spend your money as you wish), or a mandated company benefit, or any number of other economic directives and interventions, whether justified on balance or not, are infringements of liberty too.

Even to point this out (which one must be careful to do only now and then) stains you as a libertarian zealot, somebody quite beyond the normal realm of political discourse. A tax increase might be bad if it harms incentives to work, or if it unduly burdens the poor; an import quota might be costly and inefficient; and so forth. But how often does it occur to anybody to object to such policies as simple infringements of one's freedom—not all that different, in some ways, from the infringements of civil liberty that respectable opinion finds so scandalous?

There is no great mystery about the reason for this double standard. Freedoms that express themselves through market relations—the freedom to buy and sell—are widely regarded as ethically compromised. This is the freedom to gratify one's greed, to exploit others, to con and be conned, where the market is a jungle, a war of all against all. There is a germ of truth in all that, of course, enough to lend it plausibility. But it misses the larger truth, of the market as an astoundingly productive system of voluntary cooperation, in which people of myriad beliefs, loyalties, and faiths can engage with others, freely, and to their enormous mutual benefit. If Friedman, with all his powers of persuasion, could not convince people of that larger truth, it is hard to say what will.

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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